Hong Kong office space still the world’s priciest

Nothing new here.

Hong Kong has again topped the world in having the most expensive office rents. Research by global real estate services firm Colliers International reveals that Class A net office rents in Hong Kong in December 2011 stood at US$178.34 per square feet per year.

That’s over US$50 more than the second most expensive site for office space: London’s West End where rents came to US$120.31 per square feet per year. Paris was a distant third at US$90.26 per square feet per year.

Hong Kong, London and Paris were the world’s most expensive in 2011.

Singapore had net office rents at US$65.81 per sq. ft. per year, earning it the 8th ranking worldwide.

Although the top three markets above maintained their position throughout 2011, all three markets saw declines in their rents between December and June 2011. For Hong Kong, however, office rent registered a drop in the local currency largely attributed to the continued weakening demand by the banking and financial sector.

“With Hong Kong being Asia’s financial hub, we expect the local office market to head towards a cyclical downturn considering the continued deterioration of business expansion plans and slowing hiring expectations,” said Simon Lo, Executive Director of Research & Advisory, Asia at Colliers International.

In terms of forecast, Lo expects rents in Central to fall 20% in the year in view of further rent affordability deterioration among financial tenants.

Of the world’s most popular markets, those with the most significant declines in vacancy rate over the last six months in 2011 were nearly all in the Asia Pacific region. Chengdu, driven by its booming manufacturing sector, recorded a falling vacancy rate by 7.8% in the second half of 2011. In Shanghai, vacancy rate declined by 3.2%.

In terms of office construction, several cities in Asia such as Guangzhou, China and Tokyo, Japan led the way with office construction of 19.6 million and 15.6 million sq. ft., respectively, as of December 2011.

“Office rents are expected on the rise in most cities in Asia, but softening rents in Seoul and Hong Kong are a potential indicator of global economic uncertainty,” said Lo. “In Tokyo, where new supply has been increasing for the past three years, we expect construction to peak and begin to decline in the coming year.”